If all Economic History lectures had as much music, dance, costumes and extraordinary set design as the Olympic Opening Ceremony, the world would surely be awash in Economics graduates.
Danny Boyle’s extravaganza took the world through 400 years of British economic development to the delight it seems of most of the world. The criticisms from some, particularly from Asia, were that for the most part it looked back rather than looked forward, portraying a Great Britain secure and confident in its past but with little to say about its future.
It began with an 18th century agrarian idyll filled with sheep, rain and maypole dancing (football and cricket were also represented – reminding the world that Britain invented sport). Most of the population were then employed in the agricultural sector or provided services to the agricultural sector and lived in villages. Life, (and the economy), was fairly straightforward and an individual’s wealth came from ownership of the land.
It moved dramatically into the Industrial Revolution and 19th century life. The forging of the Olympic rings highlighted the nature of work in many factories of the time – hot, noisy, dangerous, and making things out of metal that changed the way people lived. The jobs in this economy were in factories which coalesced around towns and conurbations and so the population began its long term move into an urban setting. New wealth began to be created by and accrue to industrialists and entrepreneurs.
The lengthy section devoted to the National Health Service which according to Nigel Lawson (Chancellor to Mrs Thatcher) is “the closest thing the British have to a religion”, highlighted the 20th century’s change in the structure of the economy away from manufacturing towards services and in particular State service provision. Since World War 2, governments have steadily increased the levels of taxation in the economy and used the revenue together with a lot of government borrowing to provide services such as universal education, health care and social care. People moved from towns into cities Over time there have been proportionately far fewer people employed in manufacturing industry and far more people employed in these key State services. Wealth creation during this period tended to accrue to those in financial services who developed expertise in minimising tax payments and in developing financial markets in order to finance government borrowing.
The final (21st century) section focussed on technology and its dramatic effect on our lives particularly in the areas of connectedness and communication, to the delight of the younger generation. However Danny Boyle was not able to provide the answers to two key and rather difficult questions – what to do about State deficits and debts now that they have reached such enormous levels and which economic sector will provide the jobs to employ a large number of our workers in the future, if the size of the State has found its limits? The movement towards greater connectedness does not appear to be creating many jobs, merely a need for bandwidth and servers, and other high-employment service industries such as retailing are moving online rapidly.
The West is thus entering a third period of economic transition, this time moving away from a traditional service led economy. What it is moving towards is still very unclear however. The worst case would be that governments decide to collect together large numbers of unemployed young people and seek a military use for them (which effectively was the solution found at the end of the 1930s). The eventual answer should be known by the time London hosts its 4th Olympic Games.